Do Separation Laws Matter? An Experimental Study of Commitment

Coasian reasoning predicts that the conditions under which parties may terminate a partnership will affect bargaining between partners, but not the durability of partnerships. This paper endeavors to test both predictions in an experimental setting that allows agents to form and end partnerships endogenously and to bargain over resources. We find that separation rules have less effect on bargaining than predicted by theory, but larger effects on partnership stability. Perhaps surprisingly, agents who are weaker relative to their partners are more successful when either party can end a partnership unilaterally than when both must consent to a separation